Tech Guest Viewpoint: Avoid Merchandise Optimization Confusion
Executing merchandise optimization, or at least performing it so the end game is won, can be confusing and convoluted since “optimization” seeps into almost every retail activity. Are we talking assortments, space, price, promotion, categories, merchandise or some combination?
Terms are irrelevant. Results are not. Merchandise optimization must deliver and reverberate success among every store and online channels. It must drive shopper loyalty, and must be executed to maximize margins, beat competitors and draw in your shoppers.
Clearly Defined, Clearly Delivered
The mission and definition of merchandise optimization is to leverage data to create knowledge about pricing, products, assortments, space and channels that is used to attract shoppers and get them to buy from you, again and again. You collect data, analyze data and execute against that data. You manage demand and it must be strategic, dynamic, automatic and systematic.
Here are the three must-knows for effective merchandise optimization:
1. Validate what really impacts pricing. There are so many variables that touch products and pricing. Retailers can’t assume that traditional pricing models and tactics will yield optimal results. New ways, new science and technologies are being used.
For example, online and mobile technology have expanded the number of attributes that affect consumers’ decisions to buy. In order to recommend prices and forecast, and therefore shopper behavior (demand), retail science must shift from modeling demand at the SKU-level to the attribute-level. Attributes include product specifications, price/promotion, competitor prices, channel, product placement and fulfillment (e.g. reserve online – pick-up in-store).
2. Start with rigorous merchandise intelligence and demand analysis. This combines traditional price elasticity for retailers’ own products, competitive cross-elasticity with competitors’ products, substitution effects from a retailer’s own assortment (across channels) and discrete demand impacts associated with own product attributes. The results will be more precise and repeatable competitive intelligence that drives optimal assortment, prices and promotional planning.
3. Don’t underestimate the value of online data. What’s happening online has a direct impact your stores. In one recent case, online sales created in-store lift by 30%-plus by offering in-store pick-up. The Buy Online Pick Up in Store (BOPIS) phenomena adds a bit more complexity but is intensely relevant to shopper demand, in store and beyond. Any optimization practice requires the sophistication to maximize your online data.
There’s at least one other key ingredient: The “solution.” There are too many cases in which a vendor delivers a solution that gums up what works. The world is moving too fast for mistakes and mayhem. Every vendor must prove results, be it a quantitative proof of concept or otherwise. Don’t assume you’re avoiding risk by going with some “standard.” The good news? Solutions are increasingly easier to implement and apply quickly, thanks to cloud and SaaS adoption.
Bottom line, optimization of any type must be practical and prove it can extend retailer success.
Jim Sills is president and CEO of Clear Demand.
Express offers loyalty on the go
Express is making payment and participation in its loyalty program easier to accomplish from a mobile device. The specialty apparel retailer is launching a new mobile app that includes full integration with its Express Next loyalty program and cardless payment functionality.
The app will allow customers to enroll in Express Next and have access to their loyalty points, available rewards and points needed to reach their next reward. Additionally, Express Next credit card holders can now have access to card balances and scan their smartphones to make cardless payments for all in-store purchases.
Cardholders can also make payments and view their credit card transaction history. New customers will be able to apply for an Express Next credit card directly in-app.
"We know that mobile devices are increasingly important to our customers," said Elizabeth Crystal, chief marketing officer at Express. "The main driver behind the mobile app upgrade was to enhance the overall experience with Express and present an app that is relevant to our most loyal customers, whether browsing, shopping, or engaging with the brand."
Other new features include a message center providing access to relevant and geo-targeted messages, videos, offers and news, as well as a social media section including video, blog content, Instagram feed, and the option to share product pages and content via SMS, email, Facebook, and Twitter.
Also, the Shop Like a Pro styling feature allows users to scroll the latest fashion tips and trends, see what's new, customize preferences for the number of items viewed on a page, scan barcodes in-store to view product pages and view in-store inventory. There is also a store locator function.
Retailers such as Kohl’s have fully connected their loyalty programs to their mobile apps, and the emergence of mobile wallet solutions like Apple Pay and Android Pay are turning contactless card payment into a consumer expectation. Express is keeping up with the latest developments in retail apps while also providing omnichannel browsing and promotional features that help drive store traffic and purchases.
Burger King Germany orders back end stability
Burger King Germany deals with orders more complex than customers requesting Whoppers “their way.”
Operating 700 franchised stores, the Munich-based Burger King subsidiary must process 1,800 daily orders from a diverse set of franchisees. Thus the retailer needed a stable, centralized back-end logistics platform.
The retailer uses German hosted logistics firm Meyer Quick Service Logistics (QSL) to manage back-end ordering by its stores. Already using an ERP system from German enterprise technology provider CSB-System AG, QSL retained netz98, a Magento development partner, to create a new ordering system.
netz98 developed a solution based on a proprietary database between the ERP system and the Magento Enterprise Edition e-commerce platform. The new system integrates with Burger King Germany’s tour planning system, which provides detailed information on logistics and time management for the entire delivery process.
Furthermore, netz98 developed the order platform as a multi-client enabled, multi-store platform which individual franchisees could customize for their own internal IT architectures. XML interfaces allow the system to interface with various franchisee networks and firewalls.
“The franchisees’ main interest is selling food,” said Oliver Jager, project manager for QSL. “There could be capabilities from Internet Explorer 6.0 to mobile phones. It’s very unusual.”
Intuitive user operation shortens the training times for new users and aids in preventing errors. In addition, netz98 included extensive back-end access to help desk applications. Finally, the system is flexible enough to be changed as ordering needs of Burger King and its franchisees change.
“It is adjustable for the future,” commented Jager.